Tax Policy and SME Compliance in South Africa: Insight from Tax Practitioners

Abstract

Tax practitioners (such as accountants and bookkeepers) are important enablers of tax compliance. Taxpayers, particularly small businesses, look to tax practitioners for expert advice because of increasingly complex tax legislation. This study’s purpose was to examine tax practitioners’ perspectives on tax policy and SME compliance in South Africa. This study looks at the perspective of tax practitioners to extend information on tax policy and its effect on the tax compliance of SMEs. A total of 90% of companies in South Africa are classified as SMEs, which account for more than 80% of employment in the economy. Despite the importance of the SME sector in job creation, tax policies and the costs associated with them are major issues affecting the overall regulatory environment and they are identified as a major threat to SMEs’ growth. This study seeks to close this gap by examining practitioners’ perspectives on tax policy and SME compliance in South Africa. This study adopted a quantitative approach using a self-administered questionnaire which was emailed to a sample of 255 tax practitioners by using a link through QuestionPro, and this study applied descriptive statistics in analysing data. This study indicated that tax practitioners have sufficient experience and qualifications to prepare and handle tax matters for SMEs. This study demonstrated that SMEs register for taxes, file annual returns, and pay tax liability within the period stipulated by tax law. It further indicated that being tax-compliant has certain benefits for SMEs. This research is intended to assist tax authorities and the government in better creating measures to address the problem of tax compliance among SMEs in South Africa. This article adds to the body of knowledge because it uses the opinion of tax practitioners to extend debate on tax policy in tax compliance and its effect on the functioning of SMEs.

1. Introduction

Previous studies have demonstrated that a large number of small enterprises are not taxed properly and efficiently due to persistent issues that prevent the tax base from increasing, which further exacerbates tax leaks and non-compliance (Björklund Larsen, 2017; Slemrod et al., 2017).

The current situation has been improved by tax professionals who have stepped in to help with tax return assessment, completion, and submission (Smulders et al., 2017). Despite being the main players in the relationship between taxpayers and the revenue authority, tax professionals like accountants and bookkeepers can have a significant impact due to their technical and procedural tax expertise (Nieuwenhuizen, 2019). “Tax practitioners” refers to a broad range of people who offer tax services to their clients (Akinboade, 2014).

Section 240 of the Tax Administration Act of the Republic of South Africa (2011) defines a tax practitioner as any natural person who assist another person to prepare, complete, and file a tax return. The Tax Administration Act mandates that all tax professionals register with the South African Revenue Service (SARS) (Republic of South Africa, 2011). According to Mahomed (2013), there are an estimated 34,000 tax professionals in South Africa who are registered with SARS, which translates to about 3 million taxpayers. Additionally, 57% of small, medium, and micro businesses (SMEs) in South Africa who participated in the survey, which was conducted by (Coolidge et al., 2009), concluded that they outsourced some aspect of tax compliance services from tax practitioners (Coolidge et al., 2009).

There is a strict requirement in who can register as a tax practitioner in South Africa; for instance, Modikwe (2022) indicates that, according to new entry criteria that became effective on 1 July 2022 for new tax practitioners, members who were approved by SARS, the criteria underline that recognised controlling bodies (RCB) may register an individual as a tax practitioner if the individual has at least 4 to 10 years’ tax working experience or basic qualifications and an experience standard of NQF level 6 and above, with at least one accounting module and one tax module, plus at least 1 year’s tax working experience, NQF level 5 plus at least 4 years’ experience, or NQF level 4 plus 10 years’ tax working experience.

Taxation is critical to any economy’s growth and development (Tee et al., 2016). According to Ravšelj et al. (2019), SMEs play a significant role in the economies of the majority of nations by offering jobs to both skilled and unskilled workers. Despite the fact that SMEs play a significant role in the economy, about 70% of South African SMEs fail during the first year of operation, making it one of the countries with the highest failure rates globally (Statistics South Africa (Stats SA), 2017)

For small enterprises, the expense of tax compliance and a lack of fundamental tax understanding continue to be major obstacles (Nankoo, 2022). Because of this, small firms frequently lack the personnel and expertise necessary to promptly and completely fulfil all tax obligations (Deloitte, 2019). In these situations, tax professionals are essential in raising SMEs’ awareness of tax laws (Akinboade, 2014). Burkinshaw (2021) echoes this observation by coming to the conclusion that one of the main reasons SMEs turn to tax professionals for help is the complexity of tax laws. In this sense, the complexity of tax laws occasionally makes the use of tax professionals necessary (Burkinshaw, 2021). Onoja and Odoma (2020) further indicates that due to the lack of tax policy awareness, SMEs opt to make use of tax practitioners in order to achieve tax compliance (Onoja & Odoma, 2020). L. L. Buthelezi (2023) concluded that both the SMEs and tax practitioners agree that in order for SMEs to be tax-compliant, SMEs must rely more on the service of tax practitioners.

However, even though the outsourcing of tax practitioners may prove to be costly, which results in an increase in the tax compliance burden, the outsourcing of tax practitioners may advances businesses’ concentration on significant business-related matters and has the possibility to enables SMEs to concentrate more on their daily operations (Black Umbrellas, 2021); SMEs understand the significance of being tax compliance because non-compliances hinders their ability to apply and receive funding from banks and other various funders (L. Buthelezi et al., 2025).

This research indicates that tax practitioners do not enforce the law, and they are not seen as enforcers preventing fraud but they are crucial in helping clients avoid errors, improving the tax policy awareness of SMEs and impacting the growth of SMEs.

The research question guiding this study is the following: What is the perception of tax practitioners on the effect of tax policy on tax compliance of SMEs in KwaZulu-Natal? To answer the research question, this study investigates the perceptions of tax practitioners on the effect of tax policy on the tax compliance of SMEs in South Africa. The following are the aims of this study:

• Investigate tax practitioners’ perspectives on the perceived effect of tax policy on SME tax compliance,
• Investigate tax practitioners’ perspectives on the causes of SME non-compliance, and
• Investigate tax practitioners’ perspectives on the benefit SMEs can obtain from being tax-compliant.

To achieve these objectives, this study adopted a quantitative method where primary data was obtained through a survey from the tax practitioners. The study contributes to the literature by being the first to examine the perceptions of the tax practitioners on the tax compliance of the SMEs. Many studies are based in SMEs, which lack objectivity in nature. This research further aims to assist tax authorities to understand SMEs’ compliance realities in order for them to create measures to tackle the issue of tax compliance among SMEs in South Africa, which may consequently increase revenue collection. This study suggests practical recommendations such as the provision of digital tools, grants, or incentives to promote and encourage SMEs to comply with tax. Further, this study provides insights on how tax authorities may intervene to reduce tax avoidance behaviours through promotional ethical practices.

In the next section, the topic is delineated within the context of the existing literature. Following this is the research design, the results, and the discussion of the results. Finally, the conclusion of the study is presented.

2. Literature Review

2.1. Theoretical Framework: Theory of Planned Behaviour

There are different factors that may lead to any taxpayer disregarding tax, such as perceived, normative, and control beliefs (Ramsarghey & Hardman, 2020). In particular, attitude appears to be the most important factor that determines real compliance, (Al-Zaqeba & Al-Rashdan, 2020). It all comes down to fairness, If tax payers feel that there are being treated unfairly, their behaviour and attitude change, which consequently causes them to become non-compliant; perhaps non-compliance becomes second nature to them (Bosnjak et al., 2020). In fact, Bhutta et al. (2019) confirmed that there is a positive relationship between the subjective norms and compliance of tax payers with tax laws and regulations. In addition, (Etim et al., 2025; Maheshwari, 2025) affirm that subjective norms indeed directly affect compliance behaviour. Consistent with the study of (Matshona et al., 2024), this study uses the theory of planned behaviour to understand the factors that may determine the tax compliance of SMEs from tax payers’ perspectives. This theory is deemed relevant as to unearth these subjective factors that leads to SMEs’ non-compliance with tax.

2.2. Empirical Literature

The SME sector has an important role in the economic growth of South Africa. With the existence of SMEs, it will increase income, open jobs, increase community welfare, and be able to encourage economic growth on a national scale (Zulma & Hizazi, 2020). SMEs are accountable for various taxes such as income tax, capital gains tax, provisional tax, dividends tax, value added tax, employees’ tax, and employment-related levies (SME South Africa, 2024).

According to SME South Africa (2024), small business in South Africa must register for tax with the South African Revenue Service (SARS) within 21 business days of starting their business activities. A significant number of SMEs register for tax within this period because they want to avoid fines and penalties and they are aware that the state and certain private organisations prefer to only deal with tax-compliant businesses (CMS, 2021). Furthermore, small businesses require tax clearance certificates that may help the business to tender for government contracts and enter the supply chains of large corporations (Black Umbrellas, 2021).

The (Organisation for Economic Co-orporation and Development (OECD), 2015) warns that overly complex tax rules for SMEs can hurt business growth by adding extra costs. High tax compliance costs may also stop SMEs from joining the formal economy or following certain tax rules (Organisation for Economic Co-orporation and Development (OECD), 2015). The perceived complexity of tax regulations poses a challenge for SMEs, resulting in varying levels of compliance and hindering their ability to effectively support the economy (Sibiya et al., 2023). Sephapo et al. (2016) state that tax policies have a big impact on performance and can cause small business failure. Therefore, SARS needs to create strategies that make it easier for small businesses to operate in a supportive and well-regulated environment (Adanlawo & Vezi-Magigaba, 2022)

The tax regulations in South Africa are difficult to comprehend, and there is a dearth of knowledge regarding tax administration and legislation (Musimenta, 2020). Sephapo et al. (2016) found that SMEs claim that the tax laws are written in a highly complex language and that their tax morale is adversely affected by the absence of assistance for small enterprises. Furthermore, tax compliance and its associated costs are major concerns affecting the overall regulatory environment for SMEs and should be reduced through legislative and administrative changes (Evans et al., 2014; Naicker & Rajaram, 2018). Ndlovu and Schutte (2022) concluded that a lack of skills and basic tax knowledge lead to unintentional non-compliance; therefore, the penalties must be accompanied by training, awareness, and education.

According to Matarirano et al. (2019) small businesses’ compliance costs have a significant influence on their performance, and the challenges that most small businesses face in understanding and adhering to tax regulations significantly impact their financial stability and growth potential (Agu et al., 2024). Botha et al. (2021) concur that SMEs view government red tape and regulatory compliance as the primary barriers to their efficient operation.

Although SARS offers a variety of tax awareness programmes, empirical research has indicated that a lack of tax knowledge is still an obstacle to compliance with tax laws in the country as well as elsewhere in the world (Naape, 2023). This is supported by (Nankoo, 2022), who concluded that SMEs’ lack of tax knowledge continues to be a challenge for SMEs as they usually do not have the necessary staff resources.

Furthermore, SMEs with only minimal tax knowledge fail to comply with tax rules, not because they do not want to but because they lack a thorough understanding of tax obligations (Matarirano et al., 2019). This is supported by Shiya (2018), who discovered that 67% of small enterprises in South Africa failed to submit tax returns due to the complex tax system. They acknowledged the significance of laws and compliance but suggested that they be simplified to increase tax compliance among SMEs (Nieuwenhuizen, 2019).

Owing to the deficiency of tax policy awareness, SMEs opt to outsource the services of tax practitioners in order to achieve tax compliance (Onoja & Odoma, 2020). Onoja and Odoma (2020) concluded that complicated tax procedures, rules, laws, and computations lead to hiring tax professionals, which may prove to be very expensive for small businesses. This conclusion is consistent with the findings of (Smulders et al., 2017), who concluded that due to the complexity of the tax requirements, SMEs seek advice from tax practitioners in submitting and paying tax returns on time in order to avoid having penalty provisions and penalties levied against them.

To date, regulatory costs imposed upon SMEs have had a notable influence on their performance, and the tax system lays a major burden on small business taxpayers, especially in the manner of external tax compliance (Matarirano et al., 2019). This is despite a number of programmes launched by the South African government through several organisations (such as NYDA, SEDA, and SEFA) to promote small enterprises (Republic of South Africa, 2022). Naicker and Rajaram (2019) indicate that in seeking to improve the tax policy knowledge of SMEs it is important not only to provide SMEs with empowering information but also to facilitate meaningful conversations. Business owners may see tax as a burden, but by discussing their obstacles, their goals, and unearthing areas where they lack knowledge and collaborating on solutions, more dynamic and innovative small businesses can survive and thrive.

The existing context of lack of trust with the government exacerbates reluctance to pay taxes, and high tax rates enhance SMEs’ non-compliance (Okpeyo et al., 2019). For SMEs to grow and thrive, policymakers must recognise and deal with these key challenges, thereby creating an environment that encourages voluntary compliance while supporting these SMEs’ vital economic functions (Myburg & Schutte, 2025).

Black Umbrellas (2021), a partner entity of the Cyril Ramaphosa Foundation, concluded that, regardless of the perceived complexity of tax regulations, SMEs understands the significance of being tax-compliant because, if they are non-compliant, their business would not be able to receive funds in the form of bank loans or funding if tax documents are not up to date. Ndlovu and Schutte (2024) argued that small business owners are resistant towards the act of paying taxes. In these circumstances, tax practitioners must find ways to convince small business owners to file tax returns on time (Ndlovu & Schutte, 2024). Furthermore, small business owners battle with recordkeeping; this makes the work of the tax practitioners difficult because each tax return must be supported by source documents. Small business owners often fail to provide tax practitioners with relevant information on time because of their inability to properly maintain financial records. This places tax practitioners under great pressure to guarantee that returns are submitted to SARS on time (Ndlovu & Schutte, 2024).

Bird and Davis-Nozemack (2018) emphasised that because of the complexity of tax laws, SMEs seek help from tax practitioners in submitting tax returns on time as this will ensure they avoid penalty provisions and avoid penalties being levied against them. This finding is supported Ndlovu and Schutte (2024), who indicated to what extent penalties encourage small business owners to pay taxes on time. However, small business owners argued that the penalties are not necessarily the factor that compels them to comply on time. According to them, the main driver of compliance is the need to always ensure that they are in good standing with SARS and that they able to do business with the state and some private organisations (Ndlovu & Schutte, 2022).

According to Egiyi (2020), outsourcing accounting services by SMEs increases the company’s focus on essential business-related problems by freeing up time. Outsourcing tax practitioners may allow small SMEs to concentrate more on their daily operations. Owing to a lack of skills and basic tax knowledge, many small business owners are not able to be compliant by themselves; therefore, they outsource tax compliance functions to tax practitioners (Ndlovu & Schutte, 2022). The majority partially outsource these services to minimise the cost associated with tax compliance (Ndlovu & Schutte, 2022). This means that there are certain tax compliance functions that they still carry out by themselves or with the assistance of consultants at SARS branches.

Evans et al. (2014) discovered that 76% of South African SMEs felt that tax compliance enhanced their recordkeeping, while 69% stated it increased their financial knowledge of their company. Tax compliance is an essential business foundation that can increase business profits, exposure to potential investment, and overall business growth. The South African government and other relevant institutions have various initiatives in place to help small businesses grow.

Most of the literature on the complexity of tax laws and the cost of tax compliance has focused on the simplification of tax laws, the measurement of complexity of tax laws, the impact of tax compliance costs, estimation of tax compliance costs, and benefit SMEs obtained from being tax-compliant using the perspective of SMEs (Black Umbrellas, 2021; Dlamini, 2022; Myburg & Schutte, 2025; Ndlovu & Schutte, 2022, 2024; Sibiya et al., 2023). However, there are limited studies on assessing the effect of tax policy on the tax compliance of SMEs in South Africa, a developing country, using the perspectives of tax practitioners. The rationale for this study was to fill this gap.

Thus, this study uses the perspectives of tax practitioners to investigate the effect of tax policy on the tax compliance of SMEs in South Africa.

3. Research Methodology

3.1. Research Approach

This study attempted to investigate specific aspects of the tax policy that are particularly problematic or beneficial for SMEs using the tax practitioner’s perspective, and it thus adds to the body of knowledge on a previously examined and explored topic but in a different context.

3.2. Data Type, Recuritment of Participants, and Collection

The data was collected from the tax practitioners in a form of primary data through a survey. The list of tax practitioners from the South African Institute of Tax Practitioners (SAIT), South African Institute of professional Accountants (SAIPA), and Institute of Accounting and Commerce (IAC) was obtained in determining the population. According to these three organisations, the total population of certified tax practitioners registered in their database in South Africa is 752.

Research Sample

The sample for this study was determined by applying Cochran’s formula to avoid guesswork.

Since all 752 tax practitioners could not be investigated because of the time available for this study, Cochran’s formula was adopted for the sample in this study. Cochran’s formula is adopted in research when the target population is unknown or too large (Hoaglin, 2016; Woolson et al., 1986) Cochran’s formula is stated below:

$$\mathrm{no}={\displaystyle \frac{Z2pq}{e2}}$$

where

• no = minimum sample size;
• Z = value of the selected alpha level (1.96);
• P = the (estimated) proportion which has the attribute in question (0.5);
• Q = is (1 − p);
• E = is the margin of error (0.05 which is calculated at 95% confidence interval).
• Minimum sample size = ((1.96)2 (0.5) (0.5)) = 385
• (0.05)2

Therefore, the sample size is 385.

However, for the purpose of this study, the modified version of Cochran’s formula for sample size determination in small populations may be adopted. The formula is stated below:

$$n={\displaystyle \frac{n0}{1+\frac{\left(n0-1\right)}{N}}}$$

Here, N0 is Cochran’s sample size recommendation, N (where N is assumed to be 752) is the population size, and n is the new, adjusted sample size.

The sample size for tax practitioners in South Africa based on this formula is calculated as follows:

385/(1 + (384/752)) = 255

Therefore, the sample size for this study is 255 tax practitioners in South Africa.

3.3. Data Collection and Methods

Primary data was collected directly from tax practitioners in South Africa. The questionnaires, which included closed and open-ended questions, were chosen as a method of collecting data. Questionnaires were chosen because they assist in gathering valid, relevant, and reliable data that address the research objectives (Ramharak, 2016). Data was collected through a self-designed questionnaire using Question Pro-Online survey software. The participants were aware of the objectives of the study, and they were also made aware that their participation in the study is voluntary. Participants were asked to complete the survey in Appendix A. The participants were informed in the introductory paragraph included in Question Pro that the information about their organisation will remain confidential.

The full questionnaire used in the study is provided in Appendix A. The questionnaire is subdivided into three sections. Section A is related to demographic information (excluding the owner’s name and the name of the organisation), Section B relates to more closed-ended questions about determining the level of SMEs’ tax compliance with tax policies, and Section C relates to the perceived effect of tax policy on SME tax compliance. Section D focuses on benefits that SMEs can obtained from being tax-compliant.

3.4. Analysis of Data

The data collected was entered into a Microsoft Excel spreadsheet and analysed using the 2024 SPSS Statistics version 30.0.0. To ensure the reliability of the measurement instrument, Cronbach’s alpha coefficient was calculated to assess the internal consistency of the responses. A Cronbach’s alpha value of 0.70 or higher was considered acceptable, indicating a reliable scale (George & Mallery, 2018) The findings were presented in the form of descriptive statistics and cross-tabulations. Inferential statistics were used and presented in some cases.

3.5. Data Collection Instrument and Proceudre Focus

Questionnaires were utilised as the measuring instrument to collect information from tax practitioners in this study. Most of the questions in Appendix A were closed-ended, with a 5-point Likert scale (degree of agreement scale). It was expected that the questionnaire would take 10 min to complete. The questionnaire focused on the following key components:

• Perceived effect of tax policy on SME tax compliance.
• Causes of SMEs’ non-compliance.
• Tax compliance benefits.

Preferential statistics were used to analyses the results as they are presented in Section 4 of this article.

3.6. Research Procedure

To increase the response rate, a two-pronged technique was utilised, and the surveys were either sent electronically via QuestionPro or emailed to the participants. Each questionnaire was accompanied with a letter of informed consent and a cover letter outlining the study’s objectives. The electronic version of the questionnaire was double-checked to confirm that it was identical to the emailed version. The participants were given a month to complete the surveys.

3.7. Data Reliability and Ethical Considerations

Quantitative data were entered into a Microsoft Excel spreadsheet and checked for accuracy before being uploaded into SPSS with the same numbering and analysed using SPSS V1.0.0.1406.

The questionnaires were pretested by tax practitioners who were not participating in the study and taxation lecturers. The Cronbach alpha scores were above 70%, which is the standard or required score for reliability measurement. There is an element of selection bias in this study as we purposively targeted tax practitioners that prepare tax returns for SMEs.

The University of KwaZulu-Natal (UKZN) Faculty Research Ethics Committee granted ethical approval for the study. All participants were required to sign the letter of informed consent. The respondents’ right to privacy and confidentiality was respected, and they were allowed to withdraw from the survey for any reason. The next section covers results of the study.

4. Results

In this section, the results of the study are presented and discussed with reference to the aim of this study. Results are presented using tables for ease of looking and texts to explain the table values for easier comprehension.

4.1. Response Rate

According to Mellahi and Harris (2016), a response rate of 55% in a top-tier journal is considered good. This is further confirmed by Taherdoost and Madanchian (2025), when they alluded that in business and management the average response rate of 51.18% is considered good. As per Table 1 the study achieved a response rate of 56%, which is above what is considered acceptable (Mellahi & Harris, 2016; Taherdoost & Madanchian, 2025).

Table 1. The response rate for this study.

Survey Size	Tax Practitioners	Response and Non-Response Rate (Percent)
Target group	255
Usable responses	144	56%
No response	111	44%
Total	255	100%

The non-response rate of 44% of tax practitioners stemmed from their reluctance to engage in the study due to several factors, including scepticism regarding the research’s value and concerns about sensitive client information. Despite assurances of anonymity, hesitance to divulge details pertaining to client businesses and their own practices due to professional ethics and legal risk were also considered as a contributing factor in the shortfall in the number of responses by tax practitioners. This trend of result reflects the outcome of recent studies that have reported unit non-response as a common phenomenon in online surveys (Holtom et al., 2022; Plante et al., 2022; Taherdoost & Madanchian, 2025).

The non-response of practitioners has implications on the generalisation and validity of the study because of two factors that can threaten the statistical conclusion and validity. These factors are defined as inaccurate effect size estimation and low power (Taherdoost & Madanchian, 2025). Therefore, non-responses can jeopardise both external and statistical conclusion validities (Taherdoost & Madanchian, 2025).

4.1.1. Experience

Respondents were asked for how long they have been a tax practitioner. These results are shown in Table 2.

Table 2. The number of years the business has been operating.

Number of Years the Business Has Been Operating	Number	%
1–<3	8	5.6
3–<6	14	9.7
4–10	48	33.3
>10	53	36.8
Total	144	100.0

Table 2 show that the majority of respondents (53 or 36.8%) have been the tax practitioner for more than ten years. This is closely followed by those who have been in the business for four to ten years (48 or 33.3%). The smallest proportions of respondents (eight or 5.6%) have been practicing for one to five years. This was expected because Modikwe (2022) indicates that according to new entry criteria for new tax practitioners members, which was approved by SARS and came into effect on 1 July 2022, the criteria underline that recognised controlling bodies (RCB) may register an individual as a tax practitioner if the individual has at least 4 to 10 years’ tax working experience. Furthermore, SMEs may evaluate the incomparability of the tax practitioner service based on the number of years he or she has been in practice. Table 2 further shows that most of the tax practitioners have abundant capability to be able to provide knowledgeable answers to the questionnaire.

4.1.2. Outsourcing Improves Submission and Tax Compliance

Respondents were asked how many businesses they submitted tax returns for in the last tax year. These results are shown in Table 3.

Table 3. The number of tax returns submitted by tax practitioners in the last year.

Number of Tax Returns Submitted by Tax Practitioners in the Last Tax Year	Number	%
<10	15	10.4
10–19	9	6.3
20–29	25	17.4
30+	95	66.0
Total	144	100.0

According to Table 2, the vast majority of respondents (95 or 66%) submitted more than 30 tax returns and (25 or 17.4%) submitted 20 to 29 tax return for SMEs in the last tax year. This was expected because, according to Egiyi (2020), it was found that outsourcing accounting services by SMEs improves the company’s focus on important business-related matters as it frees up time. It is possible that for these SMEs, the outsourcing of tax practitioners enables them to focus more on their day-to-day operations. Owing to a lack of skills and basic tax knowledge, many small business owners are not able to be compliant by themselves; therefore, they outsource the tax compliance functions to tax practitioners (Ndlovu & Schutte, 2022). The majority partially outsource these services to minimise the cost associated with outsourcing (Ndlovu & Schutte, 2022). This means that there are certain tax compliance functions that they still carry out by themselves or with the assistance of consultants at SARS branches.

The Indication of the Highest Level of Education of the Tax Practitioners

Respondents were asked to indicate their highest level of education. These results are shown in Table 4.

Table 4. The highest level of education of the tax practitioners.

Level of Education	Number	%
Matric	1	0.7
Certificate	2	1.4
Diploma	8	5.6
Degree	85	59.0
Higher diploma/degree	48	33.3
Total	144	100

According to Table 4, the vast majority of respondents (85 or 59.0%) who are responsible for the tax affairs have a degree qualification, and the second largest number of respondents (48 or 33.3%) have a higher diploma/degree. This is supported by Modikwe (2022), who indicated that the new entry criteria for new tax practitioner members, which was approved by SARS and came into effect on 1 July 2022, underline that recognised controlling bodies (RCB) may register an individual as a tax practitioner if the individual has a basic qualification and experience standard of NQF level 6 and above with at least one accounting module and one tax module, plus at least 1 year’s tax working experience, NQF level 5 plus at least 4 years’ experience, or NQF level 4 plus 10 years’ tax working experience.

4.2. Empirical Findings

The next section addresses the first sub-objective, which was to investigate tax practitioners’ perspectives on the perceived effect of tax policy on SME tax compliance. A question was first posed asking the respondents whether SMEs register, file, and pay for tax within the period stipulated by law.

Hypothesis one was investigated using the chi-square test to determine the perceived impact of tax policy on SME tax compliance. The chi-square test in Table 5 demonstrates that (X2 = 48.889a, p =< 0.001) tax practitioners believe that SMEs register for tax within the term specified by law. It also reveals that (Χ2 = 95.944a, p =< 0.001) only a small percentage of SMEs register as a result of tax authorities’ enforcement. According to SME South Africa (2024), small businesses in South Africa must register for tax with the South African Revenue Service (SARS) within 21 business days of starting their business activities. A significant number of SMEs register for tax with in this period because they want to avoid fines and penalties and they are aware that the state and certain private organisations prefer to only deal with tax-compliant businesses (CMS, 2021). Small business owners argued that the penalties are not necessarily the factor that compels them to comply on time.

Table 5. Perceived effect of tax policy on SME tax compliance.

Perceived Effect of Tax Policy on SME Tax Compliance	Responses as Frequency (%)				Χ2	df	Asymp Sig.
	0–25%	26–50%	51–75%	76–100%
Register for tax within the period stipulated by law	28 (19.4)	20 (13.9)	72 (50.0)	24 (16.7)	48.889	3	<0.001
Register as a result of enforcement by tax authorities	86 (59.7)	17 (11.8)	28 (24.5)	13 (14.8)	95.944	3	<0.001
File annual returns within the time stipulated by law every year	14 (9.7)	13 (9.0)	92 (80.7)	25 (17.4)	118.611	3	<0.001
File annual returns as a result of tax audit and enforcement	86 (75.4)	25 (21.9)	20 (17.5)	13 (11.4)	94.611	3	<0.001
Pay tax liability within the time stipulated by law every year	12 (10.5)	15 (13.1)	89 (78.1)	28 (24.6)	108.056	3	<0.001
Pay the correct liability as a result of tax audit and enforcement	91 (79.8)	20 (17.5)	17 (14.9)	16 (14.0)	112.278	3	<0.001

Notes: Χ2 tests if a significant number selected any response option(s) over others. p < 0.001. df means the following: a”0, cells (100%) have expected frequencies less than 5. The minimum expected cell frequency is 4.5.”.

According to them, the main driver of compliance is the need to always ensure that they are in good standing with SARS (Ndlovu & Schutte, 2022). This is because if they are not, they will not be able to do business with the state and some private organisations. Therefore, timely compliance is not always a result of the fear of penalties (Dlamini, 2022). Furthermore, small businesses require tax clearance certificates that may help the business to tender for government contracts and enter the supply chains of large corporations (CMS, 2021). Should there be no registration within the period stipulated by law, access to funds and markets is restricted (Sibiya et al., 2023).

Hypothesis one was further used to determine if SMEs file annual returns within the time stipulated by law every year or if they file annual returns as a result of tax audit and enforcement. The result from the chi-square test showed that (Χ2 = 118.611 p =< 0.001) SMEs file annual returns within the time stipulated by law every year. The results above are in line with the study by (Smulders et al., 2017), who concluded that SMEs file annual return with in the time stipulated by law because most of them make use of tax practitioners to file their tax returns. According to the test (Χ2 = 94.611a, p =< 0.001), few SMEs file annual returns as a result of tax audit and enforcement.

This is supported by (Naicker & Rajaram, 2019), who concluded that small business owners are resistant towards the act of paying taxes. In these circumstances, tax practitioners must find ways to convince small business owners to file tax returns on time (Ndlovu & Schutte, 2024). Furthermore, small business owners battle with recordkeeping; this makes the work of the tax practitioners difficult because each tax return must be supported by source documents.

Lastly, hypothesis one was used to establish tax practitioners’ perspectives on whether SMEs pay tax liability within the time stipulated by law every year or if they pay the correct liability as a result of tax audit and enforcement. The result from the chi-square test showed that (Χ2 = 108.056a, p =< 0.001) SMEs pay tax liability within the time stipulated by law every year. This result is supported by Sibiya et al. (2023), who underlined that due to the complexity of the tax requirements, SMEs seek advice of tax practitioners in submitting tax returns on time as this will ensure they avoid penalty provisions and avoid penalties being levied against them. A fewer number of SMEs (Χ2 = 112.278a, p =< 0.001) pay the correct liability as a result of tax audit and enforcement.

This finding are corroborated by Okpeyo et al. (2019), who reported that small business owners recognise the need to comply as a result of tax audits and enforcement and frequently consult tax practitioners when they are already in conflict with SARS. The findings by (Swistak, 2016) indicated to what extent penalties encourage small business owners to pay taxes on time. However, the charging of substantial penalties has the potential to discourage small business owners from registering at all for taxes.

The Causes of SME Non-Compliance

The questionnaire focused on the second sub-objective, which was to determine tax practitioners’ perspectives on the causes of SME non-compliance. To investigate this sub-objective, it was necessary to ask for tax practitioners’ perspectives on the causes of non-compliance amongst SMEs. Table 6 shows the results of the causes of non-compliance.

Table 6. Causes of SME non-compliance.

Causes of SMEs Non-Compliance	n	Mean	Standard Deviation	t	df	p-Value
High costs of preparing and submitting tax returns	144	4.12	1.113	12.060	143	<0.001
The compliance costs incurred by SMEs in striving to attain tax compliance are too high	143	3.78	0.965	9.704	142	<0.001
Compliance processes are cumbersome, thus requiring many hours to apply them	143	3.66	1.088	7.222	142	<0.001
The lack of availability of relevant information on tax requirements	144	4.17	1.080	13.045	143	<0.001
The poor attitude of tax authority staff	144	3.25	1.174	2.556	143	0.012
The lack of education provided to small businesses about tax laws, reforms, and tax administration	144	4.50	0.710	25.367	143	<0.001
The lack of tax knowledge by SMEs to prepare and submit tax returns on time	144	4.37	0.645	25.452	143	<0.001
The perception that being tax-compliant will cause their business to fail	144	3.87	1.294	8.079	142	<0.001
The high tax rate	144	4.11	0.920	14.451	142	<0.001
The high expense to hire tax practitioners to prepare and submit tax returns	144	3.64	1.177	6.535	142	<0.001
The perception that the tax system is not fair to SMEs	144	4.07	0.947	13.513	142	<0.001

The reasons for non-compliance are further rated from the highest to the lowest in the table below:

Cause of non-compliance amongst SMEs	Average agreement score
The lack of education provided to small businesses about tax laws, reforms, and tax administration	4.50
The lack of tax knowledge by SMEs to prepare and submit tax returns on time	4.37
The lack of availability of relevant information on tax requirements	4.17
High costs of preparing and submitting tax returns	4.12
The high tax rate	4.11
The perception that the tax system is not fair to SMEs	4.07
The perception that being tax-compliant will cause their business to fail	3.87
The compliance costs incurred by SMEs in striving to attain tax compliance are too high	3.78
Compliance processes are cumbersome, thus requiring many hours to apply them	3.66
The high expense to hire tax practitioners to prepare and submit tax returns	3.64
The poor attitude of tax authority staff	3.25

A one-sample t-test was conducted to determine whether the high costs of preparing and submitting tax returns result in non-compliance amongst SMEs. The results compared the sample mean non-compliance score to a hypothesised benchmark of 3 (representing a neutral point on a 5-point Likert scale, where 1 = strongly disagree, 5 = strongly agree). The results revealed that the mean non-compliance (M = 4.12, SD = 1.113) was significantly higher than the benchmark (143) = 12.060, p < 0.001), indicating that tax practitioners perceive high costs of preparing and submitting tax returns as one of the factors that contributes to non-compliance amongst SMEs.

The test was then conducted to determine whether the high expense to hire tax practitioners to prepare and submit tax returns results in non-compliance amongst SMEs. The results revealed that the mean non-compliance (M = 3.64, SD = 1.177) was significantly higher than the benchmark, t(142) = 6.535, p < 0.001; the results indicated that the high expense to hire tax practitioners to prepare and submit tax returns results in non-compliance amongst SMEs. Onoja and Odoma (2020) support this finding by concluding that complicated tax procedures, rules, laws, and computations lead to hiring tax professionals, which may prove to be very expensive for small businesses. The perceived complexity of tax regulations poses a challenge for SMEs, resulting in varying levels of compliance and hindering their ability to effectively support the economy (Sibiya et al., 2023)

The test was then conducted to determine the perception of tax practitioners on whether SMEs believe that a high tax rate will result in non-compliance amongst SMEs. The results revealed that the mean non-compliance (M = 4.11, SD = 0.920) was significantly higher than the benchmark, t(142) = 14.451, p < 0.001; the results show that a high tax rate results in non-compliance amongst SMEs. Okpeyo et al. (2019) summarised the findings by claiming that high tax rates play a significant role in growing non-compliance among SMEs and may lead to SMEs evading tax.

The test was then conducted to determine whether the lack of availability of relevant information on tax requirements results in non-compliance amongst SMEs. The results revealed that the mean non-compliance (M = 4.17, SD = 1.088) was significantly higher than the benchmark, t(143) = 13.045, p < 0.001, revealing that SMEs did not comply with tax obligations due to a lack of relevant information.

These findings are supported by Deloitte (2019), who concluded that a lack of basic tax knowledge coupled with the cost of tax compliance remains a key challenge for small businesses. In addition, small businesses often do not have the skills and staff resources to tediously and fully comply with all the tax obligations (Deloitte, 2019). Furthermore, Ndlovu and Schutte (2022) concluded that a lack of skills and basic tax knowledge lead to unintentional non-compliance; therefore, the penalties must be accompanied by training, awareness, and education.

In addition, the test was conducted to further determine whether the lack of education provided to small businesses about tax laws, reforms, and tax administration result in non-compliance amongst SMEs. The results revealed that the mean non-compliance (M = 4.50, SD = 0.710) was significantly higher than the benchmark, t(143) = 25.367, p < 0.001, showing that the lack of education provided to small businesses about tax laws, reforms, and tax administration results in non-compliance amongst SME. The test was then conducted to determine whether the lack of tax knowledge of SMEs to prepare and submit tax returns on time results in non-compliance amongst SMEs. The results revealed that the mean non-compliance (M = 4.37, SD = 0.645) was significantly higher than the benchmark, t(143) = 25.452, p < 0.001; the result determined that a lack of tax knowledge by SMEs to prepare and submit tax returns on time results in non-compliance amongst SMEs.

There is insufficient tax education and administration in South Africa, and the tax regulations are difficult to understand (Musimenta, 2020). Sephapo et al. (2016) discovered that SMEs believe that tax regulations are written in a very complicated language, and a lack of support for small enterprises has a negative impact on their tax morale. This is despite the fact that the South African government has established a number of measures to help small businesses through various agencies (such as NYDA, SEDA, and SEFA) (Republic of South Africa, 2022). Naicker & Rajaram (2019) indicate that in seeking to improve the tax policy knowledge of SMEs, it is important not only to provide SMEs with empowering information but also to facilitate meaningful conversations. Business owners may see tax as a burden, but by discussing their obstacles, their goals, unearthing areas where they lack knowledge, and collaborating on solutions, more dynamic and innovative small businesses can survive and thrive.

Furthermore, the test was conducted to determine whether the poor attitude of tax authority staff results in non-compliance amongst SMEs. The results revealed that the mean non-compliance (M = 3.25, SD = 1.174) was significantly higher than the benchmark, t(143) = 2.556, p < 0.001, concluding that the poor attitude of tax authority staff results in non-compliance. The test was then conducted to determine the perception of tax practitioners on whether SMEs believe that being tax-compliant will cause their business to fail. The results revealed that the mean non-compliance (M = 3.87, SD = 1.294) was significantly higher than the benchmark, t(142) = 8.079, p < 0.001; the result shows that SMEs believe that being tax-compliant will cause their business to fail.

These findings are supported by Sephapo et al. (2016), who discovered that SMEs agree that tax laws have a significant impact on performance and can lead to small business failure. Furthermore, the current environment of low trust in the government exacerbates resistance to paying taxes (Mutanga et al., 2021).

Lastly, the test was conducted to examine the perception of tax practitioners on whether SMEs believe that the tax system is not fair. The results revealed that the mean non-compliance (M = 4.07, SD = 0.947) was significantly higher than the benchmark, t(142) = 13.513, p < 0.001; the result indicated that SMEs believe that the tax system is not fair.

According to Appiah et al. (2024), tax compliance largely hinges on SMEs’ perception of the tax system’s fairness and the amount of bureaucratic obstacles they encounter. For SMEs to grow and thrive, policymakers must recognise and deal with these key challenges, thereby creating an environment that encourages voluntary compliance while supporting SMEs’ vital economic functions (Myburg & Schutte, 2025).

4.3. Tax Compliance Benefits

The final sub-objective focused on tax practitioners’ perspectives on the benefit SMEs can obtain from being tax-compliant. To determine tax practitioners’ opinions, they were asked whether they believed that complying with tax obligations benefits SMEs. The purpose of this question was to identify if SMEs can obtain any benefits from being tax-compliant. Table 7 shows the results and question which required respondents to answer either YES or NO.

Table 7. Benefits of complying with tax legislation.

Benefits of Complying with Tax Legislation	n	Mean	Standard Deviation	t	df	p-Value
Improves the quality and accuracy of records in the business	144	4.51	0.603	29.990	143	<0.001
Helps improve the knowledge of the financial status of the business	144	4.45	0.589	29.555	143	<0.001
Assists SMEs in becoming aware of the profitability of the business	144	4.45	0.635	27.428	143	<0.001
Reduces the SME’s risk of being audited by the tax authorities	144	4.29	0.783	19.787	143	<0.001

A one-sample t-test was conducted to determine tax practitioners’ perspectives on whether being tax-compliant improves the quality and accuracy of records of small businesses. The results compared the sample mean non-compliance score to the hypothesised benchmark of 3 (representing a neutral point on a 5-point likert scale, where 1 = strongly disagree, 5 = strongly agree). The result revealed that the mean benefit (M = 4.51, SD = 0.603) was significantly higher than the benchmark, t(144) = 29.990, p < 0.001), indicating that being tax-compliant improves the quality and accuracy of records of small businesses.

The test was conducted to further ascertain tax practitioners’ perspectives on whether being tax-compliant helps improve the knowledge of the financial status of a small business. The results revealed that the mean of benefit (M = 4.45, SD = 0.589) was significantly higher than the benchmark, t(144) = 29.555, p < 0.001, revealing that being tax-compliant indeed helps improve the knowledge of the financial status of a small business. The test was conducted to further determine if tax practitioners believe that being tax-compliant assists SMEs in becoming aware of the profitability of the business. The results revealed that the mean of benefit (M = 4.45, SD = 0.635) was significantly higher than the benchmark, t(144) = 27.428, p < 0.001, revealing that being tax-compliant indeed helps improve the knowledge of the financial status of a small business.

Lastly, the test was conducted to further determine if tax practitioners believe that being tax-compliant assists in reducing SMEs’ risk of being audited by the tax authorities. The results revealed that the mean of benefit (M = 4.29, SD = 0.783) was significantly higher than the benchmark, t(144) = 19.787, p < 0.001, revealing that being tax-compliant reduces the SMEs’ risk of being audited by the tax authorities.

These results are supported by Evans et al. (2014), who found that 76% of South African SMEs agreed that tax compliance improved their recordkeeping and 69% said it improved financial knowledge about their business.

General Benefit Statement

Table 8 shows the results of a question asking whether tax practitioners believe that complying with tax obligations benefits SMEs. The question required respondents to answer either YES or NO.

Table 8. Benefits of complying with tax legislation.

Benefits of Complying with Tax Legislation	n	Mean	Standard Deviation	t	df	p-Value
Indicate your level of agreement that, overall, complying with tax obligations has some benefits for SMEs.	144	4.49	0.819	21.868	143	<0.001

The test was conducted to ascertain tax practitioners’ perspectives on their level of agreement that, overall, complying with tax obligations has some benefits for SMEs. The results revealed that the mean of benefit (M = 4.49, SD = 0.819) was significantly higher than the benchmark, t(144) = 21.868, p < 0.001, revealing that, overall, complying with tax obligations has some benefits for SMEs, which includes increases in business profits, exposure to potential investment, and overall business growth (Black Umbrellas, 2021). The South African government and other relevant institutions have various initiatives in place to help small businesses grow. It is imperative, therefore, that businesses remain tax-compliant to be considered for funding opportunities, tax breaks, and other support incentives (Olayemi & Folajimi, 2021).

5. Discussion

5.1. Discussion of the Results: Tax Practitioner’s Perspective on the Perceived Effect of Tax Policy on SME Tax Compliance

Tax practitioners believe that SMEs register for tax within the period stipulated by law and a small portion of SMEs register as a result of enforcement by tax authorities. They further indicated that SMEs file annual returns and they pay tax liability within the time stipulated by law every year. This conclusion is consistent with the findings of a study by Smulders et al. (2017), who concluded that, due to the complexity of the tax requirements, SMEs seek advice from tax practitioners in submitting and paying tax returns on time in order to avoid having penalty provisions and penalties levied against them. Bird and Davis-Nozemack (2018) underlined that, due to the complexity of the tax requirements, SMEs the seek advice of tax practitioners in submitting tax returns on time as this will ensure they avoid penalty provisions and avoid penalties being levied against them. These findings are supported by Ndlovu and Schutte (2024), who indicated to what extent penalties encourage small business owners to pay taxes on time. As a result of tax audits and enforcement, a lower percentage of SMEs file annual reports and pay their correct liabilities.

5.2. Discussion of the Results: Tax Practitioner’s Perspectives on the Causes of SME Non-Compliance

Tax practitioners agree that the lack of tax knowledge of SMEs to prepare and submit tax returns on time and the lack of education provided to small businesses about tax laws, reforms, and tax administration, as well the lack of availability of relevant information on tax requirements, leads to non-compliance among SMEs. They further indicate that SMEs believe that the tax system is not fair and that costs incurred in seeking to achieve tax compliance will cause their business to fail. Deloitte (2019) supported this finding by concluding that SMEs’ lack of tax knowledge continues to be a challenges for SMEs, as they usually do not have the necessary staff resources, and the challenges that most small businesses face in understanding and adhering to tax regulations significantly impact their financial stability and growth potential (Agu et al., 2024)

Although SARS offers a variety of tax awareness programmes, empirical research has indicated that a lack of tax knowledge is still an obstacle to compliance with tax laws in the country as well as elsewhere in the world. Naape (2023) and SMEs consider government red tape and regulatory compliance as major barriers to their businesses (Botha et al., 2021).

Furthermore, the majority of tax practitioners concluded that the compliance costs incurred by SMEs in striving to attain tax compliance are too high, and the high expense to hire tax practitioners to prepare and submit tax returns as well as the high tax rate increase non-compliance among SMEs. These findings are corroborated by Naicker and Rajaram (2019), who underlined that the high cost of compliance and onerous requirements for SMEs are two major factors in the high failure rate of SMEs, which has spurred numerous researchers to research the difficulties they confront. SMEs’ tax compliance is based on their perception of the system’s fairness and the amount of bureaucratic obstacles they encounter (Appiah et al., 2024). Due to high compliance cost and complex tax policies, many smaller businesses remain unregistered for taxation, seeing it as an expensive and burdensome regulation (Dlamini, 2022). Sephapo et al. (2016)’s tax policies have a substantial impact on performance and can cause small businesses to fail.

5.3. Discussion of the Results: Tax Practitioners’ Perspectives on the Benefit SMEs Can Obtain from Being Tax-Compliant

Tax practitioners agreed that complying with tax obligations has some benefits for SMEs, which include the improvement in recordkeeping, the business’s knowledge of its financial status, and the improvement in knowledge of the business’s profitability. Finally, it is agreed that complying with tax laws has some benefits for SMEs, including increased firm earnings, exposure to prospective investment, and overall business growth (Black Umbrellas, 2021). Furthermore, Egiyi (2020) concluded that being tax-compliant has some advantages for small businesses, such as better recordkeeping and a better understanding of the financial status and profitability of the business.

In line with the theory of planned behaviour, it is widely agreed that an SME’s attitude toward tax compliance is strongly influenced by its beliefs and social norms (Lestary et al., 2021). Furthermore, it is confirmed that resistance to tax compliance is influenced by SMEs’ attitudes toward the costs of tax compliance. These two factors play a key role in shaping their overall response to tax obligations (Al-Zaqeba & Al-Rashdan, 2020). Indeed, the unfavourable behavioural intentions of SMEs are shown to be directly influenced by their tax attitudes, as they often view tax compliance as a burden (Bosnjak et al., 2020). Though costs of tax compliance come as a burden for SMEs, many of them may benefit from tax compliance, with the government playing a huge role in ensuring their awareness.

6. Conclusions

The study examined tax practitioners’ views on how tax policy affects SME Compliance. Using a questionnaire, it found that practitioners are qualified to handle SME tax matters and that most SMEs register and file taxes on time, with a few doing so only under enforcement. However, limited tax knowledge, poor education on laws and reforms, and lack of accessible information lead to non-compliance. High compliance costs, practitioner fees, and tax rates further discourage SMEs, with many fearing that these costs threaten their survival. Consequently, a significant number of SMEs remain in the informal sector despite compliance benefits. The analysis further shows that due to their lack of tax knowledge, SMEs often rely on tax practitioners to remain compliant. At the same time, compliance brings some benefits for SMEs, such as better recordkeeping, improved understanding of financial status, and clearer knowledge of profitability. These results highlight that poor awareness of tax policy is a major challenge for SMEs. Consistent with Matshona et al. (2024) and Turyana and Supriatiningsih (2025) this study confirms that subjective behaviours strongly influence SME tax compliance. Similarly, non-compliance is often linked to perceived unfairness in the tax system (Bosnjak et al., 2020), which makes SMEs view tax as a burden and normalises non-compliant behaviour.

The key implications of this research are for governments, policymakers, and tax practitioners. Strengthening tax education, tax policy, and awareness of compliance benefits can encourage SME tax compliance. The government can use the insight from tax practitioners to design effective tax policies for (SMEs) in South Africa which focus on simplification of tax requirements and utilisation of tax incentives and providing tax education to SMEs. These policies can play a role in improving compliance amongst SMEs and increase revenue collection for SARS.

This study recommends that the government should provide online/virtual training to SMEs on how to prepare/file and pay their tax returns, and it further recommends that to improve tax policy awareness of SMEs, the government should consider providing frequent online lectures to educate them on tax policy, tax requirements, and SMEs’ rights and obligations. Lastly, the government can give incentives to SMEs that are compliant so as to enhance tax compliance.

The findings may help tax administrators design effective education programmes and policies to improve SME compliance. This paper contributes to the literature in two ways. First, it adds to the literature how tax policy influences SME compliance from a practitioner’s perspective. Second, it broadens the debate on factors shaping taxpayer behaviour. Finally, streamlining tax processes and providing guidance to sole proprietorships and small businesses will help them avoid some issues in complying with tax legislation. Providing such businesses with more accessible compliance options can alleviate regulatory burdens while also improving overall tax compliance rates.

Like other studies, this study has limitations. Firstly, moderate response of a rate of 55% may be problematic in the generalisation of the results. Future research could consider a higher response rate. Further, this study is based in KwaZulu-Natal; this poses geographical limitations. Further studies may consider other provinces of the country. Lastly, this study considered only the perspectives of the tax practitioners; further studies may consider both SMEs’ and tax practitioners’ perspectives and use a qualitative instead of quantitative method to unearth in-depth lived experiences of these important players in the tax system.